SM Group to expand, but not keen on telco

MANILA, Philippines – SM Investments Corporation, the listed conglomerate of the Philippines' richest man Henry Sy Sr, sets its sights this year on logistics, e-commerce, and other high-growth sectors, but not on telecommunications.

After SM bought a 61.2% stake in dormitory builder Philippines Urban Living Solutions Incorporated (MyTown) and about a 30% stake in 2GO Group Incorporated's parent firm, SM president and chief executive officer Frederic DyBuncio said his conglomerate is looking to invest in "partners" in these high-growth sectors.

Aside from logistics and property, DyBuncio said his group is also looking for investments in e-commerce.

"We continue to explore how we can actually get involved in the e-commerce space. It is one space we are still trying to learn more of," he said during a press conference in Pasay City on Wednesday, April 25.

Before buying into 2GO, the SM Group had taken initial steps into e-commerce by partnering with online platform Lazada.

High capital spending budget

While SM intends to expand its footprint in logistics and e-commerce, DyBuncio said the group remains focused on growing its core businesses: retail, property, and banking.

Franklin Gomez, senior vice president of finance at SM Investments, said the conglomerate is spending as much as P90 billion in 2018, of which P80 billion will be allocated for the expansion of property unit SM Prime.

"Most of our capital expenditures will be financed by internally generated cash," he added. (READ: How the Sy family and Dennis Uy became business partners)

SM Prime's P80-billion capital expenditure will be allocated to reach key provincial cities which have demonstrated promising economic progress.

"The Philippines is projected to register one of the fastest economic growth [rates] in Southeast Asia, and this will definitely benefit key cities all over the country," said SM Prime president Jeffrey Lim.

Not buying into telco

Even with a huge capital spending budget for 2018 alone, DyBuncio said the SM Group is not keen on investing in the telecommunications industry.

"The telco industry is something which we really don't understand. We're very concerned about the amount of capital required," the SM president and chief executive told reporters.

Finance Secretary Carlos Dominguez III last week said prospective entrants would need at least P200 billion to enter the local telco market.

The Department of Information and Communications Technology (DICT) is still in the process of finalizing the terms of reference for the selection of the 3rd major telco player. DICT officer-in-charge Eliseo Rio Jr had said the selection may have to wait until July this year.

In early April, President Rodrigo Duterte created an oversight committee to monitor and assist in the setting up of a 3rd telco player in the Philippines.

Created through Administrative Order No. 11, the committee has the power to assist the National Telecommunications Commission (NTC) in formulating the terms of reference for the selection and assignment of radio frequencies.

"In terms of operating, running [a telco], it would be difficult for us. [We don't know] what the issues are," DyBuncio said. –